The rating of the fixed deposit programme and long-term debt instruments have been reaffirmed at 'FAA+' and 'CRISIL AA-', respectively. The short-term rating on the certificate of deposits programme has been reaffirmed at 'CRISIL Al+'.

CRISIL Ratings said that the revision in outlook is driven by the consistency in the bank's overall performance over the last few years as evidenced by stable asset quality and earnings profile despite pandemic induced challenges, and improving liability profile.

The bank has demonstrated its ability to manage its asset quality in the post-COVID scenario and maintain non-performing assets (NPAs) at a level which is lower than peers. Over this period, the bank has also maintained its profitability metrics reflected in the return on managed assets (RoMA) remaining at 1.2% and above levels despite heightened provisioning requirements.

There has been a sustained improvement in the bank's overall liability profile marked by the increasing share of deposits in the overall external liabilities and, continued ramp-up in retail deposit franchise. This also factors in the gradual increase in the share of Current and Savings Accounts (CASA) as a share of total deposits and total liabilities, over the last 4 quarters.

The ratings remain driven by AU SFB's adequate capitalisation, the consistent ramp-up in deposit franchise, healthy reported asset quality and adequate profitability. These strengths are partially offset by moderate, though improving, the scale of operations, geographic concentration in assets and improving, though a relatively low share of current account savings account (CASA) in overall liabilities.

AU Small Finance Bank (formerly Au Financiers (India)) was incorporated in 1996 as an NBFC. AU started its banking operations in April 2017. The SFB's main focus is retail asset-financing segment, primarily in the vehicle financing segment alongside small business loans to MSMEs. Other segments include housing, gold loans, personal loans, overdraft, and commercial banking products. As of 30 September 2021, AU SFB had established operations across 811 banking touchpoints in 15 states & 2 union territories.

The bank reported a 13.5% fall in net profit to Rs 278.51 crore despite an 8.3% rise in total income to Rs 1595.65 crore in Q2 FY22 over Q2 FY21.

The scrip shed 0.79% to currently trade at Rs 1195.40 on the BSE.